A quick news search for the term indirect tax suggests it’s a critical factor for businesses to consider. For example, in a June 2012 article in Canada’s Financial Post, Ernst & Young urge companies to pay attention to goods and services taxes and harmonized sales taxes to avoid issues with changes made at both local and national levels. Another article found on a United Kingdom contractor’s site suggests that the government’s tax policies are fostering wide-ranging problems for small businesses.
Both articles underscore that indirect taxes affect every organization and can become a significant expenditure with sizable risks if not managed properly. Globalization has created tremendous opportunities for expanding business, but organizations continue to struggle with the changing regulations in their tax systems and international taxation requirements.
The indirect tax function is responsible for the accurate and timely calculation and reporting of value-added taxes (VAT), sales and use taxes, and other indirect taxes. With the rate of some VAT taxes increasing to 25%, organizations can incur significant costs. Yet many companies overlook opportunities for cost savings in the indirect tax function by underutilizing technology and implementing manual, nonstandardized processes. Another complicating factor is the decentralization and outsourcing of the function, which creates inefficiencies because the actual cost is hidden or is not fully understood.
To better address the concerns indirect taxes create, your organization should ask:
- What additional expenses will we incur if we ignore the indirect tax function?
- What strategies can we implement to manage the indirect tax function efficiently?
- How can we leverage technology to minimize costs in the indirect tax function?
Leading companies have reduced the cost of their indirect tax function by as much as 60% through a combination of organizational, process, and technology changes. Your company may achieve similar results by:
- Understanding the root causes of costs in your indirect tax function.
- Identifying the best technology and tools to minimize costs.
- Exploring solutions to reduce these costs as the pressures of globalization and changing laws continue to increase.
Does your company struggle to keep up or do you have a streamlined plan for handling indirect taxes? The Accenture Academy course Managing the Costs of the Indirect Tax Process
can help you effectively manage and control the costs of your indirect tax function.